Federally Sponsored Research at Educational Institutions:

A Need for Improved Accountability

PSAD-78-135: Published: Aug 18, 1978. Publicly Released: Aug 18, 1978.

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In fiscal year 1977, over $3.8 billion in grants and contracts was awarded to educational institutions for the conduct of research. Over 70 federal agencies sponsor or otherwise support basic research involving over 2,000 educational institutions. The federal government generally relied on the integrity of the institutions to provide assurance that research funds are used for intended purposes. Federal guidelines under Federal Management Circular (FMC) 73-8 provide principles designed to recognize all costs of such research under generally accepted accounting principles. A review was conducted to evaluate the reliability and integrity of the methods and systems educational institutions used for classifying and allocating costs to federal research grants.

Instances were noted of financial management weaknesses in the administration of federal research projects being conducted on college and university campuses. The primary causes of financial management weaknesses were the existence of very flexible guidelines for charging costs to grants and delegating responsibility for financial management to research staff without adequate guidance or independent review. Evaluations by sponsoring agencies have been limited, and institutions generally do not allocate staff for internal audits. Improvements are needed in accounting for personnel costs which represent about 60 percent of the direct expenditures for research. It is difficult to distinguish research-related costs from those related to instruction and other activities and to distinguish direct costs from indirect costs. The Department of Health, Education, and Welfare (HEW) has made several recommendations for strengthening FMC 73-8, but the majority of the HEW recommendations were considered unacceptable by the educational community.

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